The $uros to poundsr continued to trade in a narrow range yesterday, ending the currency trading session with a narrow spread up candle, with small shadows to both top and bottom, and which once again reinforced the indecisive market conditions that are currently exhibited by many other currency pairs at present. Whilst yesterday’s price action provides little clue to today or the near future, the candles of Wednesday and Friday last week are more illuminating ( excuse the pun), and with their deep lower wicks suggest a market where the bulls are buying into any reversal lower, and suggesting that we should see the euros to pounds pair rally in due course from the current price range. The strength of any move higher will depend on the support from below, which is now well established in the 0.8850 price region, and provided we see a break and hold above the 0.91 and 0.9150 price levels, then the pair should continue to rally further with the prospect of a move back to retest the 0.9350 price area in due course. Whilst parity remains a long way off, any negative sentiment towards Sterling is likely to be reflected in the pair, and with the UK General Election now looming in the distance, this could be the trigger for some interesting and volatile moves in the UK pound. Technically, the moving averages remain broadly supportive, but their value is limited at present due to the tight bunching.

The main $undamental newss week for the euros to pounds pairs is of course the ECB rate decision on Thursday, and whilst rates will almost certainly remain on hold for the time being, it is the rate statement itself which will be closely watched and analysed for any clues as to future policy from the Bank, as Europe recovers from recession, but weighed down by some of the weaker partners such as Greece. For the UK the main item of news this week is the Manufacturing Production figures, due tomorrow. No doubt Mr Brown will put his usual spin on the figures to assure everyone that all is well while he is at the helm – as the ship slips quietly beneath the waves, holed and with a ton of debt as ballast to make sure she sinks fast!

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